New IRS Audit Process: Still Trouble for Conservative ‘Dark Money’

The Internal Revenue Service is trying to recover from allegations of obstruction of justice regarding Lois Lerner’s regarding purported biased recommendations that targeted conservative groups for audit and prevented Tea Parties from gaining not-for-profit status. Now, the IRS just appointed three relatively inexperienced managers to serve as the gatekeepers for reviewing 501(c)4 “dark money pools” and their political activity, according to an agency memo leaked to the OpenSecrets Blog.

Three IRS employees were selected at random from a pool of manager-level employees (civil service grade GS-14 equivalents) and appointed on July 17 to make up the “Political Activities Referral Committees’” (PARCs). They will manage “panels” tasked with “[recommending] referrals for audit in an impartial and unbiased manner.” GS-14 is only a mid-level federal position in the GS-13 to GS-15 range for “top-level supervisory positions.” Positions beyond GS-15 are part of the Senior Executive Service.

“Dark Pools” is the common name used to refer to 501(c)4 social welfare nonprofit groups that corporations and unions use to collect and spend unlimited amounts of money “educating voters” on issues. In the last 2012 Presidential election, dark pools raised and spent over $300 million of independent expenditures outside of the control of any candidate, according to “Follow the Unlimited Money.”

The IRS’s Lois Lerner was a GS-15 with 34 years of IRS employment and making about $177,000 per year when she headed the 2012 process. According to media reports, before Lerner took voluntary retirement, she had been suspended and danger of being fired due to an IRS inquiry board finding citing “neglect of duties” and mismanagement. Despite her record, she is now believed to be collecting $102,600 per year in retirement.

The new IRS PARCs will be staffed by workers with little experience administering exempt organizations, Washington, D.C.-based lawyer and former head of the IRS Exempt Organizations Division, Marcus Owens, told OpenSecrets.

Owens stressed that the IRS previously had made certain the managers tasked with this politically sensitive audit referral power always had had meaningful experience. He warned, “I analogize it as, an airline deciding to select their pilots at random from their employees.”

Owens said he believes the IRS decision to use a lottery to appoint lower level employees was designed to cut down on the allegations of bias among the IRS managers who previously referred 90 percent more conservative organizations for an audit than liberal organizations. But Owens believes that “[n]ow, there’s a bias toward inexperience.”

The surprising change comes after the agency’s leader wanted to address the growing issue of “dark money” spent by politically active nonprofits in elections with new rules that have been significantly delayed after complaints the rules again targeted conservative non-profits.

IRS announced the change at a House Ways and Means Committee oversight subcommittee hearing Thursday, which was called to address “the Internal Revenue Service’s audit selection process and internal controls within the Tax Exempt and Government Entities division.”